New River City Downtown Study Says Market Is "Hungry For More Residential Units"

A recent River City Company commissioned study shows a continuing strong market for more residential units in downtown Chattanooga, officials said.

River City recently engaged RCLCO Real Estate Consultants to complete a detailed market analysis "to assess the forward-looking market opportunity for multi-family rental, for-sale residential, student housing, office, retail and hotel development in Downtown Chattanooga."

Officials said, "In 2013 when RCLCO completed a market analysis for Chattanooga, the downtown real estate market was in a relatively nascent stage. Since then, many neighborhoods of Downtown have flourished, and urban development has spread to other submarkets in the reason.

"With the anticipation of significant developments like The Bend and U.S. Pipe and Wheland Foundry site, the market analysis assists with identifying how planned supply and future redevelopment of sites may impact Downtown prospects across a wide range of uses."

This new report outlines target market audiences for various residential and commercial land uses in Downtown, identifies the potential depth of market demand for resident and commercial land uses, opportunities and differentiation to maximize market potential and the impact of planned public improvements on market evolution, it was stated.

Erin Talkington, managing director at RCLCO, said, “An increasingly lively and attractive downtown has been the main driver of Chattanooga’s robust economic growth. We found the implementation of Gig City in 2015 created a true inflection point in job growth and the regional economy remained resilient amid the pandemic-induced transition to work-from-home.

“The market is hungry for new downtown residential options, and there is a strong opportunity to bring residents to historically commercial parts of Downtown and create a truly mixed-use environment with places where visitors and residents can live, work and play.”

Major findings of the report include:

1. Rental Housing: Strong and Immediate Opportunity for New Rental Product, Especially Multi-Family.
   1. There is a severe lack of new product. Development opportunities are strong in rental housing across all sectors and price points, most notably affordable housing.
   2. Opportunities exist for adaptive reuse and office-to-residential conversions, particularly in the City Center and Riverfront Districts.
   3. A significant portion of projected demand will go unmet without large-scale additions to the pipeline of planned development – one to two new buildings per year until 2035.
2. For-Sale Housing: A Strong Opportunity For New Supply, Particularly Condominium Conversion or Adaptive Reuse.
   1. Product type preferences among homebuyers has evolved with condominiums a growing share. There is opportunity for small-scale office-to-residential conversion or ground up development of smaller condominium buildings.
3. Office: Older Buildings are at Risk of Underutilization or Vacancy; New Product Necessary to Maximize Retention and Capture Growth
   1. Opportunity for innovative approaches to protect office market fundamentals and seize on strong opportunities in the market for new residential product.
   2. Planned delivery of new office space will likely threaten older office buildings. However, there is an opportunity to convert these buildings to creative office with smaller floorplans or rental/for-sale residential.
4. Hotel: On Track with Current Pipeline; Attracting Weekday Business Travel is Key
   1. Weekend occupancy has fully recovered, but weekday travel has yet to rebound to pre-pandemic levels, while average daily rates have risen to fill the gap. Plans for the convention center and efforts to increase weekday travel should be a key area of focus when considering hotel supply additions.
5. Retail: Market is Broadly Balanced, but Lack of Daily Needs Retail is Major Weakness
   1. There are notable gaps in Chattanooga’s current retail supply, including residential focused and grocery options. In locations that are easily accessed by residents, focus should be towards grocery, drug store and restaurants and less emphasis on soft goods services and entertainment.

“The new market analysis is an effective tool to help us at River City Company attract the right type and size of developments to make Downtown Chattanooga successful economically. We welcome the public, developers interested in downtown, along with policy makers to use this information to inform their decisions as well,” said Emily Mack, President & CEO of River City Company. “As Chattanooga continues to welcome new residents, property is redeveloped and new developments take place, it is essential that we find the right mix of housing, retail, hospitality and office space in this post-pandemic environment.”

 

RCLCO also identified a selection of critical success factors informed by the market analysis and by best practices in peer cities, and guided by their expertise in emerging urban markets across the United States.

 

Market-Driven Adaptive Reuse – There is a compelling opportunity to embrace adaptive reuse, particularly conversions of older buildings to residential product. River City Company has spearheaded reuse efforts before with The Gold, The Maclellan and The Tomorrow Buildings, where office spaces were converted into hotel or multi-family buildings.

 

Retail-Residential Synergy – The analysis highlights the importance of retail-residential synergy, which is achieved through building a critical mass of neighborhood-serving retail including supermarkets, drugstores, as well as retailers that can help create and strengthen community identity such as restaurants.

 

Attracting Business Travel – Currently, Chattanooga’s hotels operate at far higher occupancies on weekends. With the possibility of hosting more major business conferences and corporate events at the Chattanooga Convention Center, in-week travel could fill occupancies gaps.

 

Efficient Public Transit – RCLCO recognizes that as Chattanooga adds households and jobs in downtown, transit becomes all the more important as a means of alleviating traffic and effectively connecting areas.

 

Effective Placemaking – Creating a strong sense of place in commercial areas, parks and in other public spaces creates foot traffic and supports a vibrant atmosphere for both residents and visitors. River City Company programs like Reimagining Broad Street and events like Rock the Riverfront exemplify how redesigning public spaces and activating them can draw residents, employees and visitors outdoors which attracts private investment and value tenants for vacant commercial properties.

 

The full downtown market analysis is available for free to the public at https://www.rivercitycompany.com/reports-and-studies. For questions, additional information or to discuss potential downtown development projects, contact River City Company at 423-265-3700 or by emailing Dawn Hjelseth at dawn@rivercitycompany.com to be connected to the appropriate staff member.